Avoid This Common Business Planning Mistake

Here’s a scenario I see often. A client has a business idea. They think it’s a great idea but they haven’t done much, if any, customer development. Before they’ve even completed real market research to validate their idea, they’re thinking about color schemes and names, what their website and logo will look like or where the business location will be.

That’s the wrong approach.

The right approach is spending a ton of time talking to potential customers before you get into operational strategies for the business. Keep in mind you don’t and shouldn’t talk to people in a way that feels sales-y. You’re not trying to do your friends a favor so they “get in on the ground level” on this amazing idea. You’re raising awareness and developing a lot of information and data points that you can use to effectively market your idea. And, most importantly, you’re using the data gathering to find out if this idea is actually going to work.

If you do have a great idea people will be saying things like: “Where can I find this product/service? I really want it.” If you’re hearing that, it’s ok to move forward. If you’re not, it’s time to make changes to the idea.

If you‘ve made some of these mistakes in the past don’t fret too much. You can always shift, pivot or adjust your ideas. I always like to remind my clients to think about the business planning process like an experiment. If one thing doesn’t work, you test out something else. The planning is never static, it’s always changing.

It’s important to use the information you gather from your network to fine tune your idea. “Most business plans don’t survive first contact with customers,” according to Steve Blank, one of the founders of the Lean Startup movement. That’s why you need to speak to a lot of potential customers first before you start.

Here are three examples of how things can turn out if you do (or don’t) spend enough time upfront talking to potential customers.

Example 1: Failing slow

You have an idea for a restaurant because you love brunch and everyone around you loves brunch. You’ve worked in the food business in the past. And you see how much people are willing to pay for brunch. Therefore, you think, it’s a good business to be in. You immediate scope out a location and start thinking about your name and logo and you put a down payment on a lease. Then you start talking to investors. Six months later after you’re out all the money for the lease, you have to abandon the idea because it’s going to take more money than you have to see it to completion and you’re starting to find out the concept isn’t going to bring in the number of customers you want.

If you had taken the time to validate this idea by talking to potential customers you would have found out early on that the neighborhood where you want to be located already has too many brunch spots. You also would know that your target customers love donuts and not brunch in the morning. You missed an opportunity to get written up in the hyper-local blog that everyone in that neighborhood reads. You certainly wouldn’t have found out from other restaurant owners what the rate of failure has been for similar concepts. Nor would you have asked the question of failed restaurateurs, what do you wish you had done differently? Never forget that your network is important and the customer development process is vital to success.

Example 2: Failing fast

You love pickles, and you have the perfect recipe that all your friends and family love. In fact, you give your pickles as gifts and get rave reviews. You could make a side hustle business out of these pickles! Before you even think about names you start asking your friends and family – hey, where do you normally shop for pickles and how often do you buy them? If I sold these pickles how often do you think you’d buy them? What’s price point you normally pay for pickles? Are you happy with the pickle choices out there or are you longing for something different? Know any other pickle-lovers I can talk to?

As you ask the questions it becomes apparent that only a few of the people you talk to actually buy pickles with any frequency so maybe they’re not as excited about pickles as you thought. You also start doing some back-of-the-envelope math and find out that you’d need to sell 200 pickle jars per week to make it even worth your time. Then you start wondering to yourself, will I love making pickles when I have to make THAT many jars per week and only make a small margin for my efforts? The answer starts becoming clearer that you’d rather keep this as a hobby. You used your network to ask the questions, your expertise to make the pickles and found out that you didn’t have the kind of passion required to make this a full business. There’s nothing wrong with that at all. The customer development process prevented you from spending a dime on this business that you eventually found out wouldn’t quite work for you.

Example 3: Successful launch

You’ve been in international development for ages and have experience working both in government agencies as well as the private sector. You know there are certain times of year when your current organization and others like it bring on extra contractors to get through grant writing season. You’re motivated to become one of those contractors in the future because, while you gladly take three weeks of vacation per year, you’re yearning to be able to travel more and don’t like being chained to the desk anymore. You have an idea you want to pitch that involves turning your current role into a contracting role. Clearly, you have the expertise to do this and the passion for it since you’ve been employed in this industry for over a decade.

You use your current network (not necessarily in your direct line of supervision) to safely float the idea that you want to switch to contracting. You also talk to a few other people who’ve done it and ask what they would do differently if they had to do it over again. You ask about how steady the work has been and find out that after the first year things get pretty steady, but during the first year, it can be a little unsettling to not know where your next paycheck is coming from. Finally, you talk to a few organizations different from your own to find out when and how frequently they need extra help and you ask whether they’d be interested in putting you on their list of people to reach out to when that happens. They gladly say sure! You remember to ask whether they mind if their contractors work remotely. They say they prefer it and require extra insurance and cyber-security protections for all their contractors. That’s good to know – and this is something you probably never would’ve found out unless you asked about it. You have a market-proven idea, so now you carefully take it to your current supervisor to see if you can do the same thing at your current firm. You didn’t have to take on all the risk or spend any money to get your business “going” before you found out it would, in fact, work!

I’ve learned that when you rigorously use the customer development process you get three main benefits:

It gives you more chances for success

You can get the business up and running quicker

It informs you if you need to shift/pivot BEFORE you spend time/money on your idea

What have you experience while doing customer interviews to test out a business idea?